I had several 1099-C (s) issued in 2020, approximately 11. When the pandemic hit, I had to make quick negotiations to get out from under a pile of debt to survive. I now need to record these on TT, and complete my Insolvency Worksheet.
I understand what will be involved as far as getting figures for household items, car, etc., But here is where I could use some guidance:
- At the exact time of debt forgiveness, I had not filed my 2018 and 2019 taxes (both had taxes due.) They were officially filed though late 2020. Do I include that tax liability on my worksheet, even though I had not filed yet, but it was a financial obligation?
- For the succession of Forms 982, my understanding is that I have to file a new form, and a new worksheet for every single 1099-C. There doesn't seem to be a shortcut to this, right? However, in principle, would I be able to do this: Example: if my liabilities were $60K in March, and $4K forgiven in March, then would I start the next Form 982 in April with the new liability amount of $56K, and also just modify specific entries on the insolvency worksheet, which would probably be credit card liability, or would I need to go through the entire insolvency worksheet, and all the way down the list, pulling my electric account, and water bill, etc. If so, can you think of an easier way for me to do this? Should I leave the electric, water, etc. off if I qualify for insolvency without these smaller items? I was extremely insolvent, if it turns out that I do add in the taxes unfiled at that point. (They are all filed now.)
- Do I send every insolvency worksheet via TT, or will it not let me, and if that is the case can I just keep on file?
I realize this post is long, so thank you for reading it, and all opinions/strategies welcome on how to keep this accurate, but also efficient.
The screen where you enter Form 1099-C in TurboTax says the following.
"Important info about your canceled debt...
In some situations, canceled debt can be excluded from taxable income. These situations might include bankruptcy or insolvency. If you think one of these exclusions applies to you, we recommend you have a tax pro review your situation."
If you are using the CD/Download TurboTax software, you can complete Form 982 and the Statement of Insolvency in forms mode, but there is essentially no help or guidance. You have to know what you're doing. That's why consulting a tax professional is recommended.
In TurboTax Online there is no way to complete Form 982 for insolvency.
one form 982 is supposed to cover all discharged indebtedness and must be filed with your return. only debt that has actually been discharged is listed which would mean the unpaid liabilities that haven't been discharged don't get entered. see a pro so your filing is done correctly. generally, there are only two ways to get tax debt discharged - an offer in compromise or chapter 7 bankruptcy if certain rules are met.
Thank you! I have downloaded Turbo Tax. So I think I will have access to Form 982. I have completed an Insolvency Worksheet before, but it was about 15 years ago. I remember it was a lot of work then as well.
So only 1 form 982 for all of my 1099-C(s) added together? My debt forgiveness has been reported on 1099-C(s). The part about liabilities was about on the insolvency worksheet we have to list all assets and value, and all liabilities immediately preceding the debt, which is why I ask if a rolling number, being reduced from the prior debt is the most efficient way of handling that.
Maybe I'm mistaking the Form 982. Maybe I just enter the 1099-C and complete an insolvency worksheet for each one. I had seen a post somewhere else within TT, but perhaps it was someone who had a BK. Mine is strictly credit card settlements, with only the discounted (forgiven part of the debt) entered on the forgiven form. They do call it Cancelled/Forgiven Debt on the 1099-C.